Opinion,
Mr. Justice Gbeen :
We are clearly of opinion that the literal meaning of the bylaw of this plaintiff, which imposes fines upon members for non-payment of dues or interest, is, that the fine of ten per cent, is imposed upon the aggregate amount of all money due at the end of each month no matter for what cause. This would include fines previously imposed, as well as the amount previously owing for dues and interest. The question then arises whether such a by-law is a valid exercise of the legislating power of the association.
It is not claimed that the general law of 1859, under which the plaintiff Avas incorporated, confers any special power to impose fines, and hence we assume that the right to enact the by-law in question is merely the general right, which all corporations possess, of enacting suitable by-laAvs for their government. The provision of the sixth section of the act of 1859 that no premiums, fines or interest on such premiums that may accrue according to the provisions of the act shall be deemed usurious, must be held, so far as fines are concerned, to be limited to such fines as are imposed under by-laAvs which are lawful. Is then the by-law in question a valid by-law? That depends upon a consideration of its meaning and effect.
We haire stated the meaning of this by-law to be that the [9]*9fine is imposed each, month upon the whole amount due at the end of each month, no matter for what cause. The words are, “ each and every stockholder or trustee who shall neglect or refuse to pay his monthly dues or interest as often as the same shall become due and payable shall forfeit and pay the additional sum of ten cents monthly on each and every dollar due by him.” It is clear the ten cents penalty or forfeiture is to be paid monthly. This being so, it is to be repeated every month during which the amount due remains unpaid. The effect of this would be that if at the end of December in any year the member was indebted fifty dollars to the association and remained so throughout the year following, he would then owe as a fine twelve times the original penalty on that one default, in other words, one hundred and twenty per cent, upon the principal sum for which default was made. In addition to this he would also owe the full interest he might be paying on the amount expressed in his obligation, no matter how usurious that interest might be. Still further, as the balance is to be struck at the end of each month, the member would owe at that time all that he owed at the end of the preceding month, and, in addition thereto, the interest and penalty for the eurrentmonth besides the dues; and the account would be made up by charging him with ten per cent, upon the principal, the interest and the fine, due at the end of the preceding month, and adding them to the dues and interest of the current month. If another default was then made, the same process would .be repeated at the end of each succeeding month during the continuance of the defaults. It is needless to enter into a detailed computation to show what the aggregate result of such a process would be in any given case. That it is unreasonable, extortionate and oppressive to the last degree must be at once conceded. If the .monthly penalty were a hundred per cent, instead of ten it would only be a difference in degree, not in character. Of course if there is an unlimited right to impose, by means of a by-law, any amount of fine or penalty which the association may please to ordain, and the law is powerless to interfere, the results must be accepted, no matter how unjust or oppressive they may be. But we do not so understand the law upon this subject.
The fines in this case were imposed by means of a corporate [10]*10by-law. While it may be conceded, that as between a corporation and one of its members a somewhat different rule would prevail, from that which would be applicable as between the corporation and strangers, yet there is a limit of authority even when corporators only are affected. We have not been referred to any case in which an unlimited authority to impose fines by a building association, has been declared by any court. A number of decisions adverse to such a right have been made by courts of last resort though none by this court, the direct question having, apparently, never been before us. The legislature of Pennsylvania by the sixth section of the act of April 10, 1879, P. L. 17, enacted that “fines or penalties for the nonpayment of instalments of dues, interest and bonus or .premiums, shall not exceed two per centum per month on all arrearages.” If this plaintiff were subject to this law the question would be settled at once, and all of the fines in excess of two per cent, per month would be undoubtedly illegal. But the plaintiff was chartered under the act of 1859, and it is admitted, or at least found by the court below and the finding not challenged, that it has never accepted the provisions ■of the act of 1879, and therefore is not subject to it. We do not, however, see that this circumstance is very material, because there is no previous statutory authority to exact any specified fine, and the open question we are considering is, what is the law in the absence of such authority ? It is very clear now, and since 1879, that the policy of the law in this commonwealth, is that building associations shall not exact oppressive and extortionate fines from their defaulting members, and we feel amply justified in deciding, as we now do, that a fair inference flows from this legislation that fines in excess of two per cent, per month are oppressive and unreasonable by policy of law. That policy is put in the form of explicit statutory mandate as to all associations which are subject to the operation of the act of 1879, whether by subsequent incorporation, or by previous incorporation, and subsequent acceptance. As to the time anterior to the statute we feel no hesitancy in saying that a monthly penalty of ten per cent, repeated by arithmetical progression with each succeeding default, was clearly oppressive, extortionate and unreasonable, by policy of law and by the teachings of the enlightened con[11]*11science of men. The effect of such a taint upon a by-law is to render it void, and hence we are not called upon to fix upon any rate of fine which would have been reasonable and hold the by-law good for that rate and void only as to the excess. The taint is fatal to its validity and it is therefore without any force. The purpose of the fine is merely to enforce the payment of the dues and interest, and as this is only an obligation for the payment of money, the extortionate character of the penalty becomes the more conspicuous in proportion to the amount by which it exceeds the ordinary rate allowed by law, and by general consent, for the use of money. .No sound reason can be advanced for the necessity of exacting so gross a penalty for a mere omission to pay a debt.
The question has been before other courts than ours and has been adjudged in accordance with the principles stated. Thus in Ohio, the legislature of the state expressly authorized building and loan associations to levy and collect from their members, “ such suifis of money by rate of stated dues, fines .....as the corporation by its laws may adopt.” Here would seem to be an unlimited authority to the associations to impose any amount of fines they might see fit, but the Supreme Court of Ohio said, in a case arising under its provisions: “ It is to be regretted that the legislature was not more specific in making the grant of power thus intended to be conferred.
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Opinion,
Mr. Justice Gbeen :
We are clearly of opinion that the literal meaning of the bylaw of this plaintiff, which imposes fines upon members for non-payment of dues or interest, is, that the fine of ten per cent, is imposed upon the aggregate amount of all money due at the end of each month no matter for what cause. This would include fines previously imposed, as well as the amount previously owing for dues and interest. The question then arises whether such a by-law is a valid exercise of the legislating power of the association.
It is not claimed that the general law of 1859, under which the plaintiff Avas incorporated, confers any special power to impose fines, and hence we assume that the right to enact the by-law in question is merely the general right, which all corporations possess, of enacting suitable by-laAvs for their government. The provision of the sixth section of the act of 1859 that no premiums, fines or interest on such premiums that may accrue according to the provisions of the act shall be deemed usurious, must be held, so far as fines are concerned, to be limited to such fines as are imposed under by-laAvs which are lawful. Is then the by-law in question a valid by-law? That depends upon a consideration of its meaning and effect.
We haire stated the meaning of this by-law to be that the [9]*9fine is imposed each, month upon the whole amount due at the end of each month, no matter for what cause. The words are, “ each and every stockholder or trustee who shall neglect or refuse to pay his monthly dues or interest as often as the same shall become due and payable shall forfeit and pay the additional sum of ten cents monthly on each and every dollar due by him.” It is clear the ten cents penalty or forfeiture is to be paid monthly. This being so, it is to be repeated every month during which the amount due remains unpaid. The effect of this would be that if at the end of December in any year the member was indebted fifty dollars to the association and remained so throughout the year following, he would then owe as a fine twelve times the original penalty on that one default, in other words, one hundred and twenty per cent, upon the principal sum for which default was made. In addition to this he would also owe the full interest he might be paying on the amount expressed in his obligation, no matter how usurious that interest might be. Still further, as the balance is to be struck at the end of each month, the member would owe at that time all that he owed at the end of the preceding month, and, in addition thereto, the interest and penalty for the eurrentmonth besides the dues; and the account would be made up by charging him with ten per cent, upon the principal, the interest and the fine, due at the end of the preceding month, and adding them to the dues and interest of the current month. If another default was then made, the same process would .be repeated at the end of each succeeding month during the continuance of the defaults. It is needless to enter into a detailed computation to show what the aggregate result of such a process would be in any given case. That it is unreasonable, extortionate and oppressive to the last degree must be at once conceded. If the .monthly penalty were a hundred per cent, instead of ten it would only be a difference in degree, not in character. Of course if there is an unlimited right to impose, by means of a by-law, any amount of fine or penalty which the association may please to ordain, and the law is powerless to interfere, the results must be accepted, no matter how unjust or oppressive they may be. But we do not so understand the law upon this subject.
The fines in this case were imposed by means of a corporate [10]*10by-law. While it may be conceded, that as between a corporation and one of its members a somewhat different rule would prevail, from that which would be applicable as between the corporation and strangers, yet there is a limit of authority even when corporators only are affected. We have not been referred to any case in which an unlimited authority to impose fines by a building association, has been declared by any court. A number of decisions adverse to such a right have been made by courts of last resort though none by this court, the direct question having, apparently, never been before us. The legislature of Pennsylvania by the sixth section of the act of April 10, 1879, P. L. 17, enacted that “fines or penalties for the nonpayment of instalments of dues, interest and bonus or .premiums, shall not exceed two per centum per month on all arrearages.” If this plaintiff were subject to this law the question would be settled at once, and all of the fines in excess of two per cent, per month would be undoubtedly illegal. But the plaintiff was chartered under the act of 1859, and it is admitted, or at least found by the court below and the finding not challenged, that it has never accepted the provisions ■of the act of 1879, and therefore is not subject to it. We do not, however, see that this circumstance is very material, because there is no previous statutory authority to exact any specified fine, and the open question we are considering is, what is the law in the absence of such authority ? It is very clear now, and since 1879, that the policy of the law in this commonwealth, is that building associations shall not exact oppressive and extortionate fines from their defaulting members, and we feel amply justified in deciding, as we now do, that a fair inference flows from this legislation that fines in excess of two per cent, per month are oppressive and unreasonable by policy of law. That policy is put in the form of explicit statutory mandate as to all associations which are subject to the operation of the act of 1879, whether by subsequent incorporation, or by previous incorporation, and subsequent acceptance. As to the time anterior to the statute we feel no hesitancy in saying that a monthly penalty of ten per cent, repeated by arithmetical progression with each succeeding default, was clearly oppressive, extortionate and unreasonable, by policy of law and by the teachings of the enlightened con[11]*11science of men. The effect of such a taint upon a by-law is to render it void, and hence we are not called upon to fix upon any rate of fine which would have been reasonable and hold the by-law good for that rate and void only as to the excess. The taint is fatal to its validity and it is therefore without any force. The purpose of the fine is merely to enforce the payment of the dues and interest, and as this is only an obligation for the payment of money, the extortionate character of the penalty becomes the more conspicuous in proportion to the amount by which it exceeds the ordinary rate allowed by law, and by general consent, for the use of money. .No sound reason can be advanced for the necessity of exacting so gross a penalty for a mere omission to pay a debt.
The question has been before other courts than ours and has been adjudged in accordance with the principles stated. Thus in Ohio, the legislature of the state expressly authorized building and loan associations to levy and collect from their members, “ such suifis of money by rate of stated dues, fines .....as the corporation by its laws may adopt.” Here would seem to be an unlimited authority to the associations to impose any amount of fines they might see fit, but the Supreme Court of Ohio said, in a case arising under its provisions: “ It is to be regretted that the legislature was not more specific in making the grant of power thus intended to be conferred. .....That there are limits, however, beyond which the corporation by its by-laws cannot go, is undoubted. (1) The amount of the fine must be reasonable. (2) It can be imposed only by way of punishment for some delinquency in the performance of a duty which the member may owe to the corporation by reason of his membership. (3) It is unreasonable, and therefore, we assume that the legislature did not intend that more than one fine should be imposed for the same delinquency: ” Hagerman v. The Ohio B. & S. Ass’n, 25 Ohio 186; Forest City United Land and Build. Ass’n v. Gallagher, 25 Ohio 208.
In Endlich on Building Associations, § 412, the writer says: “But the courts have been unanimous in discountenancing a repeated imposition of the same fine increased every time, upon the principle of arithmetical progression. Thus, where the fine upon each share’s dues in arrear was for the first [12]*12month. 12 cents; for the second month 37 cents; for the third month 75 cents; for the fourth month 11.25, and for every following month 50 cents more than the amount charged in the preceding one, the rate was held to he unreasonable and exorbitant;” citing Second New York Building Association v. Gallier, cited by Birdseye, J., in the Citizens’ Mutual Loan and Accumulating Fund Association v. Webster, 25 Barb. 263. Mr. Endlich, in § 413 of his excellent work, says : “ The proper measure of fines is the real damage the building association sustains from the failure of a member to pay his dues, which damage is really equal to interest upon the amount together with the proportion coming to it from the then attainable premiums upon the sale of money. The fine should be slightly in excess of this, so as to make it more profitable to the member to pay promptly than to lag behind...... A fine of from one to two per cent, per month would in nearly all cases be sufficient and just;” citing Ocmulga Building & Loan Association, 52 Ga. 427. While we express no binding opinion upon this subject, as it is not necessarily before us, there is much good sense in the suggestion, and the amount of the reasonable fine intimated in such cases seems to accord very closely with the amount fixed by our own law of 1879.
The argument that only one fine could be imposed, because the legislature could not be presumed to have intended to authorize more than one, is not applicable in the present case, because we are construing not a legislative enactment, which must be enforced as far as may be, but a by-law of a corporation, which is plainly in violation of the principles we have stated and therefore of no effect whatever. In Maryland the same ruling appears to have been made in the cases of Shannon v. Howard Building Ass’n, 36 Md. 383, and Monumental Building Ass’n v. Lewin, 38 Md. 445.
The general rule that by-laws of corporations must be reasonable and must not be oppressive on peril of invalidity is such familiar doctrine that a citation of authorities in support of it is unnecessary. ' In Endlich on- Build. Ass’n, at § 271, it is said: “ and all by-laws to be binding, must be in conformity (1) with existing and supreme laws.....; (2) with the charter, its letter and spirit; (3) with reason and equity:” [13]*13Ang. & Ames on Corp., § 347. The same rule exists as to ordinances of municipal governments, as was held in Kneedler v. Borough of Norristown, 100 Pa. 368. For the reasons we have stated, we hold that the by-law of the plaintiff imposing the ten per cent, penalty in question is unreasonable and oppressive and therefore invalid and of no effect.
It is argued, however, that the fines or some of them were voluntarily paid by the defendant and therefore cannot be recovered back. This is not an action to recover back the illegal fines, but a scire facias by the association on the mortgage given by the defendant; and the question is, for what amount shall judgment be entered, or, rather, how much is legally due on the mortgage. There is a clear distinction between a suit to recover back moneys which have been paid by mistake either of law or fact, and interposing as a defence such payments as could not have been recovered on account of their illegality. In the latter class of cases, the payments as a rule are credited on the amount legally due. This is always done in cases of usurious payments where the obligation is still outstanding. We can see no difference in principle between that class of cases and the present. While it may be true that the fines are no part of the mortgage debt, it is also true that they are moneys paid by defendant to plaintiff in consequence of a relation of debtor and creditor existing between them; and if the creditor have no right to receive them as fines, he has no right to receive them in any other capacity than as creditor. Being received by a creditor it is obvious the moneys thus paid must be applied to whatever was legally due. Even if the question depended upon whether the defendant made the payments distinctively as for fines, the evidence is not at all clear that such was the fact. A gross sum was paid of which the fines were a part, but no specific receipt was given and the credits entered in the account were in aggregate sums. But we think this feature of the case quite immaterial; since the payments, so far as the fines are concerned, were for illegal demands which the plaintiff could not claim, and having received them, cannot either in law or in conscience retain them. The question in this proceeding is only how much is legally due upon the obligation in suit, and in determining [14]*14tliat question, credit should be given for ail moneys claimed and received as fines.
Judgment reversed and record remitted with directions that the amount due, if any, upon the mortgage in suit, be determined in accordance with the foregoing opinion.